Question
A tractor for over-the-road hauling is to be purchased by AgriGrow for $78,000. It is expected to be of use to the company for 6
A tractor for over-the-road hauling is to be purchased by AgriGrow for $78,000. It is expected to be of use to the company for 6 years, after which it will be salvaged for $3,200. Transportation cost savings are expected to be $130,000 per year; however, the cost of drivers is expected to be $50,000 per year, and operating expenses are expected to be $35,000 per year, including fuel, maintenance, insurance, and the like. The companys marginal tax rate is 25 percent, and MARR is 10 percent on after-tax cash flows. Suppose that, to AgriGrows surprise, they actually dispose of the tractor at the end of the fourth tax year for $5,200. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after only 4 years.
Use straight-line depreciation (no half-year convention). End of Year ATCF 0 $ 1 $ 2 $ 3 $ 4 $ After-tax PW: $ After-tax AW: $
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